What Is Loan Stacking? – The Business Backer

What Is Loan Stacking? – The Business Backer

What Is Loan Stacking?

Running a business takes a lot of careful planning. Occasionally, you may require additional rounds of funding to fully execute your business goals.

Some business owners may pursue loans from different small business lenders. However, loan stacking, or taking out too many loans from separate lenders within a short period, can be risky. Read our guide to learn more about loan stacking and what you can do to avoid it.

 

Why Is Loan Stacking Risky?

Taking out different loans from various lenders can quickly become very difficult to manage. Handling too many due dates throughout the month can adversely affect your cash flow and the ability to save for the future.

Additionally, if you miss any due dates, you may also run the risk of defaulting on one or more of your business loans. Missed or late payments can negatively affect your credit score, and past-due amounts can become considerably harder to pay off. When you have several different loans from multiple lenders, you may also have a harder time making payment arrangements in case you get behind on your loans.

 

What Are Some Alternatives to Loan Stacking?

If you’re in need of additional capital, you may have funding options that can help you avoid loan stacking. Keep in mind that your options depend on a variety of factors, including your credit health and cash flow. Here are a few alternatives to loan stacking:

  • Seek funding from your original lender: You may be able to secure additional rounds of funding from your original lender. Business lenders may be more willing to provide additional funding if you’ve been a good customer and have made payments on time.
  • Consider revolving credit: You can apply for complementary loan products to access additional capital when cash flow is low. Revolving credit, including a business line of credit or business credit card, are two reliable funding options you can use to supplement cash flow.
  • Refinance your loan: If your cash flow has improved since you took out your business loan, you may be able to secure additional funds or more favorable terms with your existing lender. Contact your lender to discuss refinancing options.

 

About Bonnie P

Bonnie is a Chicago transplant who’s committed to seeing the world on a dime. As an avid news junkie with a fascination with finance, she loves to help others do more with less.

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